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Policy, politics merge

Hey there, time traveller!
This article was published 21/3/2013 (1612 days ago), so information in it may no longer be current.

All government budgets are political documents. They reflect in dollars collected and dollars spent the priorities of the governments drafting them. But because they are political documents aimed at winning favour with voters does not mean that they necessarily are bad. Finance Minister Jim Flaherty's $282.6 billion budget Thursday is a case in point.

The centrepiece of the budget is the promise to slay the deficit in 2015-2016, all else flows from that. It is a Harper government priority, the lynchpin of its claim to being a sound fiscal manager despite a record of ever-more spending. It's a political imperative for the government, too, because it was re-elected in 2011 on a promise to balance the books in time for the next election in 2015 when it can be expected to campaign on past promises to cut taxes by such means as doubling the amount Canadians are allowed to put into tax-free savings accounts and to extend income splitting to working families, among other measures.

All blatantly political, but it's also good policy to get spending under control and keep it there so that debt-servicing doesn't curb spending options or saddle future generations with past excesses. Just ask Paul Martin and Jean Chrétien.

Mr. Flaherty, however, has not taken steps as severe as conditions forced on Messrs. Martin and Chrétien in 1995, when they cut federal spending by 8.8 per cent over two years. In fact, Mr. Flaherty's decision to reduce the spending increase to just one per cent this year seems spend-thrift by comparison. But again, the fiscal winds aren't blowing nearly so hard today so avoiding unnecessary pain is not a bad thing, even if it's good politics.

It is argued, in fact, that Mr. Flaherty could have been nicer, that balance need not come quickly because it will come eventually, and that, in the interim, more could be spent on problems largely created by provinces such as Manitoba, and particularly Alberta and Ontario, that have not done much to curb health-care costs or debt loads.

But because you can make rash spending decisions does not mean you should, no matter how good it might feel in the moment. The future remains uncertain, and at the same time, pouring money into provinces has had the effect of making them profligate.

Stimulus, however, cannot be dismissed and it wasn't despite serious hits on the revenue side -- about $10 billion less than projected from lower than expected growth and oil prices. The budget commits to extending the municipal infrastructure plan for 10 years. While total annual spending will remain pretty much flat at about $4.5 billion a year, the extension gives other levels of government certainty with which to plan, create jobs and amenities. That's not a bad thing.

Measures to help manufacturing, again, can pay off politically because it is Ontario and Quebec that are hurting the worst on that front, having shed hundreds of thousands jobs in recent years. But having shed those jobs, it's not just good, but necessary, to create conditions to bring them back through budget measures to cut taxes that allow for capital investment and address the chronic mismatch of worker skills and available jobs through new and expanded training programs.

There were also measures that might be seen as compassionate, such as commitment to a more focused plan to house the homeless, and some that might seem tough, like slowing program spending.

But the most important policy and the biggest political risk is the commitment to slay the deficit.


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